3 Down Payment Myths You Can Ignore

If you’re like most people, you’ve gotten plenty of advice from people who have bought and sold their own homes - but there are three common down payment myths that have been floating around for years that you can safely ignore.

3 Down Payment Myths You Can Ignore

Saving up for a down payment is hard. In fact, in a recent study by NerdWallet, 44 percent of people said that having enough cash for a down payment was keeping them from buying a house. But maybe the down payment isn’t that bad - check out these three down payment myths that most people believe:

• Myth #1: You need 20 percent down

• Myth #2: You can get a loan for a down payment

• Myth #3: Cash offers will beat yours every time

Myth #1: You need 20 percent down

For a long time, 20 percent down was necessary to buy a home - but that’s not the case today. In fact, there are plenty of loan programs that allow you to borrow to buy a home without putting down that much money. FHA loans, for example, only require 3.5 percent down, and if you or your spouse was (or is) in the military, you might qualify for a VA loan - and that doesn’t require a down payment at all.

The downside to putting down less than 20 percent when you buy a home is that you’ll most likely have to pay for private mortgage insurance, or PMI (unless you have a VA loan).

Myth #2: You can get a loan for a down payment

You can’t take out a loan for a down payment, because if you do, the lender will factor it into your mortgage approval amount. As a result, you’ll probably qualify for less than you would if you had received the money as a gift. It’s totally acceptable to have an immediate family member gift you some cash to use as a down payment, though, as long as you can prove it was actually a gift and not a loan. (FYI, lying on a mortgage application is a felony.)

Related: Down payment gifts: What to know if you use one

Myth #3: Cash offers will beat yours every time

A lot of sellers prefer cash offers - but they’re not the be-all, end-all. Not all sellers care much about a fast closing, and your down payment won’t matter at all if the sellers are wheeling and dealing. Sometimes all you have to do is make a higher offer than someone else does. Remember, the sellers don’t actually see most of the money you pay for the house - it goes to pay off their own mortgage, and what’s left over goes in the seller’s pocket.

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